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Questions and Answers
What is one of the main applications of the CPRS classification?
What is one of the main applications of the CPRS classification?
Which organization utilized the CPRS classification to assess climate risk exposure in its 2018 Financial Stability Report?
Which organization utilized the CPRS classification to assess climate risk exposure in its 2018 Financial Stability Report?
Why are certain sectors identified as climate-relevant according to the content?
Why are certain sectors identified as climate-relevant according to the content?
What aspect of climate policy does the CPRS classification emphasize?
What aspect of climate policy does the CPRS classification emphasize?
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Which of the following is not mentioned as a factor regarding the identified sectors?
Which of the following is not mentioned as a factor regarding the identified sectors?
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What percentage of the global insurance market did the 32 IAIS Members cover in the analysis?
What percentage of the global insurance market did the 32 IAIS Members cover in the analysis?
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What is a major challenge in analyzing climate-related risks according to the findings?
What is a major challenge in analyzing climate-related risks according to the findings?
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Which exercise supports the analysis of systemic risk in the insurance sector?
Which exercise supports the analysis of systemic risk in the insurance sector?
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What does the quantitative data analysis reveal about insurers’ investment assets in relation to climate risks?
What does the quantitative data analysis reveal about insurers’ investment assets in relation to climate risks?
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Which organization's scenarios were utilized in the analysis of insurance sector impacts from climate change?
Which organization's scenarios were utilized in the analysis of insurance sector impacts from climate change?
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What type of transition does the identified scenario with climate change policies pursue?
What type of transition does the identified scenario with climate change policies pursue?
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What was a limitation of the analysis on climate-related risks in the insurance sector?
What was a limitation of the analysis on climate-related risks in the insurance sector?
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Which aspect of climate change poses a challenge according to the content?
Which aspect of climate change poses a challenge according to the content?
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What does the IAIS paper primarily discuss regarding climate risk in the insurance sector?
What does the IAIS paper primarily discuss regarding climate risk in the insurance sector?
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What aspect of the climate-related risks does Section 5 of the report address?
What aspect of the climate-related risks does Section 5 of the report address?
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In which year did the IAIS publish its first qualitative analysis on climate change's impact on insurance?
In which year did the IAIS publish its first qualitative analysis on climate change's impact on insurance?
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What does the conceptual framework mentioned in the report illustrate?
What does the conceptual framework mentioned in the report illustrate?
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What focus does the Issues Paper on Climate Change Risks to the Insurance Sector have?
What focus does the Issues Paper on Climate Change Risks to the Insurance Sector have?
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What is one of the outcomes mentioned for the data collection in assessing the insurance sector's exposure?
What is one of the outcomes mentioned for the data collection in assessing the insurance sector's exposure?
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What overarching theme is presented in Section 4 of the report?
What overarching theme is presented in Section 4 of the report?
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Which of the following reflects the concept of 'green' investments as described in the content?
Which of the following reflects the concept of 'green' investments as described in the content?
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What are the average asset holdings of insurers in equities, corporate bonds, and loans and mortgages?
What are the average asset holdings of insurers in equities, corporate bonds, and loans and mortgages?
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What is the primary focus of the report regarding risk analysis?
What is the primary focus of the report regarding risk analysis?
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Which sector is noted to have greater uncertainty in its stress factors?
Which sector is noted to have greater uncertainty in its stress factors?
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What factors are embedded in the 'too little, too late' scenario?
What factors are embedded in the 'too little, too late' scenario?
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How does the report view the weight of stress factors derived from different methodologies?
How does the report view the weight of stress factors derived from different methodologies?
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Which of the following describes a characteristic of a disorderly transition scenario?
Which of the following describes a characteristic of a disorderly transition scenario?
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What is the implication of not standardizing assumptions in existing methodologies for shocks to assets?
What is the implication of not standardizing assumptions in existing methodologies for shocks to assets?
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Which climate-relevant sectors are considered in deriving stress factors?
Which climate-relevant sectors are considered in deriving stress factors?
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What is a potential consequence of insurers reducing their investments in companies exposed to climate-related risks?
What is a potential consequence of insurers reducing their investments in companies exposed to climate-related risks?
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Which of the following best describes the term 'procyclical behavior' in the financial system?
Which of the following best describes the term 'procyclical behavior' in the financial system?
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What are the identified transmission channels through which climate-related risks may impact insurers' investment portfolios?
What are the identified transmission channels through which climate-related risks may impact insurers' investment portfolios?
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Which type of financial institution is part of financial conglomerates that may be affected by a decline in the financial soundness of one member?
Which type of financial institution is part of financial conglomerates that may be affected by a decline in the financial soundness of one member?
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What effect could the failure of several non-systemic financial institutions have on the financial system?
What effect could the failure of several non-systemic financial institutions have on the financial system?
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Which of the following types of portfolios are particularly exposed to climate-related risks?
Which of the following types of portfolios are particularly exposed to climate-related risks?
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Climate-related risks might lead to an increased default risk in which type of financial asset?
Climate-related risks might lead to an increased default risk in which type of financial asset?
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What major event exemplified the disruption of the financial market due to interlinkages between institutions?
What major event exemplified the disruption of the financial market due to interlinkages between institutions?
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What is the approach used for combining information from different datasets called?
What is the approach used for combining information from different datasets called?
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Which factors are given as a range for the 'too little, too late' scenario?
Which factors are given as a range for the 'too little, too late' scenario?
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What is the primary purpose of implementing the discussed method?
What is the primary purpose of implementing the discussed method?
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How many jurisdictions are represented in the model mentioned?
How many jurisdictions are represented in the model mentioned?
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Which dataset is NOT mentioned as a source for the model?
Which dataset is NOT mentioned as a source for the model?
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What limitation is noted regarding the method used in the discussed approach?
What limitation is noted regarding the method used in the discussed approach?
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What does Graph 13 illustrate?
What does Graph 13 illustrate?
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Which of the following best describes the variables in the dataset?
Which of the following best describes the variables in the dataset?
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What is the main takeaway about the confidence in the projections from this dataset?
What is the main takeaway about the confidence in the projections from this dataset?
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What is a possible outcome of implementing the method described?
What is a possible outcome of implementing the method described?
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What aspect of data is emphasized in the implementation of the method?
What aspect of data is emphasized in the implementation of the method?
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Which of the following statements about the ND-GAIN index is true?
Which of the following statements about the ND-GAIN index is true?
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What is the relationship between ND-GAIN data and Bloomberg data in this context?
What is the relationship between ND-GAIN data and Bloomberg data in this context?
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Which scenario describes an early policy action leading to minimized physical and transition risks?
Which scenario describes an early policy action leading to minimized physical and transition risks?
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What is highlighted as a critical factor in designing climate scenarios concerning financial impacts?
What is highlighted as a critical factor in designing climate scenarios concerning financial impacts?
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Which principle dictates that scenarios should identify key variables affecting scenario pathways?
Which principle dictates that scenarios should identify key variables affecting scenario pathways?
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What time horizon should scenarios appropriately cover to assess long-term climate change risks?
What time horizon should scenarios appropriately cover to assess long-term climate change risks?
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What outcome is associated with the 'too little, too late' scenario regarding transition risk?
What outcome is associated with the 'too little, too late' scenario regarding transition risk?
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What defines an orderly transition scenario in the context of climate policy?
What defines an orderly transition scenario in the context of climate policy?
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How should scenarios accommodate the potential for short-term stress derived from long-term climates?
How should scenarios accommodate the potential for short-term stress derived from long-term climates?
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What characterizes the late policy action scenario in relation to global climate goals?
What characterizes the late policy action scenario in relation to global climate goals?
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What does the Probable Maximum Loss (PML) quantify?
What does the Probable Maximum Loss (PML) quantify?
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How is the Annual Average Loss (AAL) defined?
How is the Annual Average Loss (AAL) defined?
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What does a return period of an extreme event signify?
What does a return period of an extreme event signify?
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What aspect does the Annual Probability of Exceedance (AEP) focus on?
What aspect does the Annual Probability of Exceedance (AEP) focus on?
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What is a primary benefit of utilizing a fixed balance sheet in climate scenario modeling?
What is a primary benefit of utilizing a fixed balance sheet in climate scenario modeling?
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In risk assessment, how are second-round effects important?
In risk assessment, how are second-round effects important?
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What is a drawback of using a dynamic balance sheet for climate scenario modeling?
What is a drawback of using a dynamic balance sheet for climate scenario modeling?
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Which of the following aspects relates to transitional risks?
Which of the following aspects relates to transitional risks?
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Which of the following describes reactive management actions in the context of balance sheet modeling?
Which of the following describes reactive management actions in the context of balance sheet modeling?
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What does the concept of 'too little, too late' imply in climate risk assessment?
What does the concept of 'too little, too late' imply in climate risk assessment?
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What does the term 'aggregate exceedance probability' signify?
What does the term 'aggregate exceedance probability' signify?
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In what way does a fixed balance sheet model limitation manifest in scenario modeling?
In what way does a fixed balance sheet model limitation manifest in scenario modeling?
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What is a characteristic of a dynamic balance sheet approach in climate scenario modeling?
What is a characteristic of a dynamic balance sheet approach in climate scenario modeling?
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Why might it be difficult to validate reactive management actions in a dynamic balance sheet?
Why might it be difficult to validate reactive management actions in a dynamic balance sheet?
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What outcome is generally associated with employing a fixed balance sheet versus a dynamic one?
What outcome is generally associated with employing a fixed balance sheet versus a dynamic one?
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How does the absence of reactive management actions impact a fixed balance sheet?
How does the absence of reactive management actions impact a fixed balance sheet?
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Which indicator is specifically relevant only to life insurers and not to non-life insurers?
Which indicator is specifically relevant only to life insurers and not to non-life insurers?
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What type of losses are typically used to estimate the impact of climate change on insurance?
What type of losses are typically used to estimate the impact of climate change on insurance?
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Which risk type indicates the expected losses during an extreme event year?
Which risk type indicates the expected losses during an extreme event year?
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What type of assets must be considered baselines in the context of climate-related risks?
What type of assets must be considered baselines in the context of climate-related risks?
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Which indicator would be used to measure the impact on a firm's profit and loss primarily due to physical risks?
Which indicator would be used to measure the impact on a firm's profit and loss primarily due to physical risks?
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What does the term 'AAL' stand for in the context of insurance losses?
What does the term 'AAL' stand for in the context of insurance losses?
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Which type of indicator may only apply to physical risks according to the provided content?
Which type of indicator may only apply to physical risks according to the provided content?
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In which scenario would only physical provisions be considered without changes in mortality or morbidity?
In which scenario would only physical provisions be considered without changes in mortality or morbidity?
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What is the key advantage of using multiple climate scenarios in assessing climate risks?
What is the key advantage of using multiple climate scenarios in assessing climate risks?
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What is indicated as a necessary consideration when assessing impacts over a medium-to-long term horizon?
What is indicated as a necessary consideration when assessing impacts over a medium-to-long term horizon?
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Which factor is seen as a burden during the short-term exercise related to climate scenarios?
Which factor is seen as a burden during the short-term exercise related to climate scenarios?
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What is a key characteristic of the balance sheet model proposed for climate impact assessments?
What is a key characteristic of the balance sheet model proposed for climate impact assessments?
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In what way is the evolution of climate change's impact on business models being assessed?
In what way is the evolution of climate change's impact on business models being assessed?
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Why might a bottom-up short-term exercise avoid granular scenario specifications?
Why might a bottom-up short-term exercise avoid granular scenario specifications?
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What is considered a primary challenge in establishing methodologies for climate risk assessments?
What is considered a primary challenge in establishing methodologies for climate risk assessments?
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What would be a consequence of not standardizing assumptions in methodologies for climate-related asset shocks?
What would be a consequence of not standardizing assumptions in methodologies for climate-related asset shocks?
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What is the key feature of the 'Hot house world' scenario?
What is the key feature of the 'Hot house world' scenario?
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Which aggregation level provides the greatest consistency across firms?
Which aggregation level provides the greatest consistency across firms?
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What is a significant disadvantage of using broad economic factors in climate risk modeling?
What is a significant disadvantage of using broad economic factors in climate risk modeling?
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Which aspect does the sectoral level aggregation NOT address in climate risk assessment?
Which aspect does the sectoral level aggregation NOT address in climate risk assessment?
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What is a consequence of specifying impacts at the activity level?
What is a consequence of specifying impacts at the activity level?
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Which disadvantage is commonly associated with high granularity in scenario specifications?
Which disadvantage is commonly associated with high granularity in scenario specifications?
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How do climate factors impact firms under scenario specifications?
How do climate factors impact firms under scenario specifications?
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What is a primary characteristic of the aggregation level that focuses on firm-specific impacts?
What is a primary characteristic of the aggregation level that focuses on firm-specific impacts?
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Which of the following represents a significant advantage of using sectoral level aggregation?
Which of the following represents a significant advantage of using sectoral level aggregation?
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What challenge does the activity level aggregation face in data utilization?
What challenge does the activity level aggregation face in data utilization?
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What is a limiting factor when applying the scenario narrative approach?
What is a limiting factor when applying the scenario narrative approach?
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Why might firms prefer flexibility in their modeling approaches?
Why might firms prefer flexibility in their modeling approaches?
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What type of risk improvement is prompted by forcing firms to enhance modeling capacities?
What type of risk improvement is prompted by forcing firms to enhance modeling capacities?
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What challenge does the granularity of scenario specifications introduce?
What challenge does the granularity of scenario specifications introduce?
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Study Notes
Global Insurance Market Report
- The report, titled "Global Insurance Market Report," is a special topic edition.
- The edition focuses on the impact of climate change on the financial stability of the insurance sector.
- The focus is exclusively on insurers' assets.
- Data was gathered from 32 IAIS Members, representing 75% of the global market.
- The analysis aims to understand insurers' asset-side exposures to climate-related risks, and supervisors' perspectives.
- Climate change scenarios were developed to assess the future impact of climate change.
About the IAIS
- The IAIS (International Association of Insurance Supervisors) is a voluntary membership organization of insurance supervisors and regulators.
- It has more than 200 jurisdictions as members.
- Its mission is promoting effective and globally consistent supervision of the insurance industry.
- The IAIS was established in 1994.
- It is the international standard-setting body for insurance supervision.
- The IAIS actively coordinates with other international financial bodies.
Executive Summary
- The report is the first global quantitative study on the impact of climate change on the insurance sector.
- Over 35% of insurers' investment assets are considered climate-relevant.
- The majority of climate-relevant exposures are within equities, corporate debt, loans, mortgages, sovereign bonds, and real estate.
- Climate-related risks are concentrated in counterparties involved in the housing and energy-intensive sectors.
- There are notable regional differences.
Acronyms and Abbreviations
- Provides a list of acronyms and their meanings. Includes terms like BIS, COP26, CDS, CPRS, EIOPA, ESG, FSB, GA, GHG, GIMAR, GME, IAIS, IPCC, NACE, ND-GAIN, NGFS, SIF, TCDC, TCFD, WRI and more.
Contents
- The document lists the topics covered in the report, a necessary table of contents.
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Description
This report analyzes the effects of climate change on the financial stability of the global insurance market, focusing on insurers' asset-side exposures. Data from 32 IAIS members lend insights into future risks and regulator perspectives on the insurance sector's resilience.
